ReFi 2024: Progress and Challenges in the Use of Blockchain for Decarbonization and Environmental Regeneration

The enthusiasm and community working in ReFi (Regenerative Finance) grows, but are the maturity of the projects and the real impact advancing? We update our 2022 report.

RUBEN@ANTOM.LA

APR 10, 2024 SHARE

I decided to work full time on environmental regeneration in 2020 after dedicating myself to software and technology development for several years. Since 2014, I was focused on blockchain: I was a co-founder of Rootstock, the first smart contract platform on Bitcoin. It was logical that my initial interest was there, and that the first climatech projects we analyzed with Antom had to do with the intersection of both worlds. There were pioneering startups in Latin America like Kilimo, EthicHub, or Moss, and the ReFi concept appeared in the crypto world.

A year and a half ago, we made a first edition of Pulso about the use of blockchain for sustainability: we explored definitions and uses of this technology for decarbonization and environmental regeneration. This time we set out to update the landscape, both in terms of the maturation of proposals and real impact, as well as extension in Latin America.

My previous feeling coincided with the information we were finding: the enthusiasm and the community working in ReFi grew, the topic entered the agenda, but we are still in the initial stages of traction and positive impact. Perhaps it is a good omen to lack the frenetic speed of the crypto world, which had bubbles that grew and exploded; it could indicate that ReFi grows sustainably, with real support.

Let's see some signs of interest in the topic:

The Ethereum Foundation included ReFi as one of the main use cases of the platform, along with DeFi or NFTs;

Leading sector publications started to educate about the term (CoinMarketCap or Cointelegraph);

Carbon Copy and ReFi DAO published a report on the current state of ReFi, which talks about some 500 projects;

Platforms like Regen Network or Celo place ReFi at the center of their value proposition;

Gitcoin constantly includes ReFi or climate solutions within its Grant programs;

Projects on Rootstock like Tropykus or Give4Forest turn to work on the topic.

As for figures that speak about the impact of this sector, we did not find consolidated statistics, but some numbers from important actors give an idea. KlimaDAO shows statistics of CO2 credits issued by Verra tokenized versus credits from the traditional market, and there it is observed that the volume circulating in blockchain is small compared to the total market. If we look at the volume of CO2 effectively removed from the atmosphere, the one used for offsetting, it is also very small compared proportionally to what was removed in the traditional circuits (only 600,000 tons).

An article by Flowcarbon (a new relevant actor) mentions that the volumes handled onchain reached 17 million tons of CO2, but that in general they are of low quality or were credits already retired offchain. It does not specify dates or source of information, but the data seems to be similar to the previous ones.

The Regen Network activity explorer indicates that 332,889 eco credits have been created, of which 47,041 have been retired. 

The aggregator Simbiotic Finance has some figures on the ReFi ecosystem: it estimates the volume of tokenized CO2 assets at USD 67 million, those related to nature at USD 13 million, and those linked to the circular economy at USD 2 million.

At the same time, if we look at articles about 'promising' or 'to watch' projects in 2024, companies we mentioned in the previous newsletter are named: Moss, KlimaDAO, Toucan, and a few others. There were few new actors positioned globally (Flowcarbon, Regen Network, Celo). It seems we are still in the cycle of emergence and refinement of projects, in an experimental stage.

With that said, let's see what other voices contribute and how the ecosystem has advanced at the regional level. If you don't have a basic knowledge base about what blockchain is, I suggest you first read the previous edition since we will take some notions for granted.

One obstacle that appears in environmentalism for the adoption of blockchain is its bad environmental reputation. Bitcoin and its consensus algorithm, Proof of Work, are criticized for their energy consumption. We are not going to delve much into that topic, but we do cite that Cambridge published a ratification of its model for measuring Bitcoin's electricity use that shows that impact was exaggerated, that Bitcoin is starting to be an investment that can be framed as part of an ESG program, and that also moving away from Bitcoin there are multiple blockchains and initiatives to reduce the environmental footprint of crypto infrastructure (Crypto Climate Accord).

Advances and new definitions

During this time, new definitions have advanced about what ReFi is called. Both in the report from Carbon Copy and ReFi DAO as well as in other sources, this sector is very broadly referred to as "the space of social and ecological impact backed by Web3", encompassing not only environmental regeneration but also "systemic issues like climate change and income inequality".

At Antom, we understand ReFi as the intersection between Web3, blockchain, and environment: applications that use decentralized technologies for environmental regeneration. We will leave aside for the time being platforms that work exclusively on social impact.

In blockchain, there's a lot of talk about total value locked (TVL), a figure that represents the sum of assets deposited in decentralized finance protocols. In ReFi, it's hard to find figures of this type. The closest are the figures from Simbiotic Finance that we mentioned, but the platform is still in an early stage and the tokens listed and the quality of the information need to be scrutinized. To obtain more accurate and complete data, a survey project by project would have to be conducted.

There are figures on the number of projects, which speaks to the enthusiasm for the sector. The Carbon Copy report lists at least 500 active projects in existence as of its publication date (Q1 2024). Positive Blockchain gathers environmental and social impact projects, but selecting filters related to ReFi counts 443 active projects.

In the Pulso edition on blockchain, we classified ReFi projects into these categories:

Environmental assets (use of blockchain to represent environmental assets and trade them),

Decentralized organizations (large-scale coordination of groups of individuals who do not know each other, but thanks to this technology can work towards a common goal),

New models of incentives (delivering tokens as a reward for certain behaviors to promote their adoption and allow the exchange of alternative values),

Transparency and traceability of production chains, and

Administrative transparency (registration of environmental actions of countries signatories to agreements to reduce the possibility of fraud and data manipulation, for example).

The Carbon Copy report maintains the spirit of these but creates a broader taxonomy in which others unfold (some of which do not have to do with environmental impact):

ReFi Ecosystem Taxonomy, from the Carbon Copy report.

For the report's authors, the greatest opportunities lie in:

dMRV: Creation of reputable frameworks for digital measurement, reporting, and verification for the voluntary CO2 market.

Financing of environmental projects and microfinance: Expanded access to financing through low-interest loans thanks to minimal operational costs and digital integration.

Climate adaptation: Addressing the climate change adaptation gap through customized financial solutions like global liquidity funds.

Impact investment: Connecting small investors with real impact through impact-generating investments, such as crowdfunding for actions, green asset index funds, and green bonds.

In her opening speech at the ReFi Summit, Ana Lerner Nesbitt, CEO of Climate Collective, discussed the ecosystem considering Gartner's hype cycle: "I think we are in the middle of the peak of inflated expectations, and in some of the voluntary carbon market solutions and digital MRV protocols, we might even be touching the valley of disillusionment." "Early efforts tokenized assets with questionable environmental impact," she says. "Today we see that most participants working in voluntary carbon markets, dMRV, etc., are building digital infrastructure for an end-to-end digital carbon market, perhaps even one that integrates with Article 6.4 of the Paris Agreement and a UN-backed carbon accountability framework."

ReFi Projects in Latam

Latin America seems to be seizing opportunities in the ReFi world. This is indicated by the opinions of several leaders we consulted.

Greta Gawianski, product owner at Open Earth Foundation and member of Climatech Argentina, participated in the ReFi Talents program of the Frankfurt School of Finance and Management. "That a University focused on management and finance offers this course for 200 people to delve into ReFi for free is a sign that something is happening in this intersection between Blockchain and Regeneration, it is no longer a niche and is becoming a relevant topic," she says.

"One of its main potentials is the possibility of generating new business models (after learning from the crypto industry) to value nature assets that today cannot be monetized and end up being destroyed with the idea that 'the only thing of value is the land'. Carbon credits are the most widespread use case. We can consider doing a business of conservation, instead of it being exclusively designated for reserves maintained by governments or donations."

Greta highlights the enormous potential that ReFi has in Latam: "The level of projects and conversations happening in Argentina are more than on par with what is being discussed internationally. Latin America has a huge potential, as there is more land available for conservation and regeneration than in the global north. International companies are setting carbon neutrality goals (which largely means "buying carbon credits to offset emissions"), and it won't be in developed countries where they will find supply. This speaks of an opportunity to develop a revenue stream towards a new industry based on exporting regeneration."

Some blockchain-based CO2 and biodiversity credit projects are Moss, Nativas, GBM, and Ruuts, which we talked about in past newsletters.

The Chilean venture eGreen is a good example of how blockchain use in the CO2 market can evolve towards more comprehensive and beneficial integrations. It started by offering CO2 measurement to companies, and in 2018 incorporated blockchain first to manage data reliably and immutably and then to tokenize CO2 bonds with greater transparency about the transaction, but it didn't stop there.

"When we participated in Techstars Accelerators in 2022, we realized that the needs of developed countries were different from those of Latin Americans: they were not interested in price variation, but in the carbon bond being of quality. They suggested we had to get involved in the origin. So, we started using blockchain to capture project data: we use remote sensing and soil sensors that measure the ecosystemic carbon flow, the data is stored on blockchain and generates real-time charts so that the bond verifier has access to them as if they were freshly captured, and so that buyers can see the progress. For this process, we opted for Stellar, an American blockchain platform with low energy consumption. We want to bring projects to life, not have them be static," says Andrés González, co-founder and CEO of eGreen.

For González, there lies the real value of technology: automating data collection, using AI to process it, and viewing the project's progress in real time, and democratizing that knowledge so that more people are motivated to regenerate. Project measurements are usually manual because sensors are very expensive, but the firm was able to advance in this thanks to a partnership with a Silicon Valley company that produces affordable sensors.

In its initial market search, eGreen sold about USD 800,000 in tokenized bonds from traditional market projects (to add transparency to the transaction between buyer and seller). But since 2023, it focuses on its own projects to ensure quality, with four in implementation; one of them represents 300,000 CO2 bonds over five years. It is also developing regenerative agriculture projects in Chile, Peru, and Colombia. "In Europe, there is a semi-approved regulation to pay farmers money for demonstrating carbon captures on agricultural lands. It's a trend that is coming."

"Latin America's capacity to absorb carbon, especially on agricultural lands, is gigantic. The current market is USD 2 billion in sales a year and is supposed to grow to 100 billion, will that step be only with traditional actors? No, it will be with technology."

In dMRV linked to agricultural production, Ucrop.it is one of the most notable projects in the region. "We use blockchain to give immutability, governance, and verification to 'Crop Stories' that producers and companies share to demonstrate in a traceable manner (to whom, how, when, and where) the sustainable management of their fields (no deforestation and preservation of biodiversity), along with cultivation practices that, based on evidence and with the producer's permission, feed metrics that companies can take to processes, brands, and products robustly to sustain real impact claims and metrics (carbon reduction, water use efficiency, field preservation, among others) from the field to the market (in a box of cereal, for example)," says Diego Hoter, co-founder & CEO of the company.

"This allows capturing financial and commercial benefits in the form of incentives that producers and companies share for working together, leverages the stewardship of agricultural sustainability through supply chains, and eliminates the risk of involuntary greenwashing between producers and companies."

Ucrop.it has ⁠more than 7 million hectares analyzed in sustainable landscape and verified crop stories, ⁠⁠70 client companies, ⁠1100 active agricultural producers, and operates in 10 countries (Argentina, Australia, Brazil, Canada, Ecuador, the USA, Mexico, Paraguay, Peru, and Uruguay).

For Hoter, the ReFi ecosystem is growing regionally, and there's an immense opportunity for agricultural production. "The market changed from voluntary to mandatory in the last 15 months, with laws in the European Union and the United States (EUDR, Inflation Reduction Act, Canada Clean Resolution, among others). This means that the scrutiny of insets and sustainable claims is regulated, creating legal contingencies for those who do not comply. This affects companies, agricultural producers, and financial institutions. Verification, evidence, immutability of agricultural records in sustainable production landscapes and sustainable cultivation practices gain value, as does the potential to tokenize assets to finance agriculture with more liquidity and less friction."

Una aplicación más reciente de blockchain es su llegada a la energía renovable, a través del financiamiento de proyectos de generación distribuida y de generación/distribución de ingresos por ella. Ejemplo de implementación de esto es el proyecto colombiano Unergy. 

Su CEO, Eduardo Ospina, explica: “Unergy nace para cerrar la brecha de financiación en el sector de las energías limpias. Utilizamos blockchain para garantizar la trazabilidad y la seguridad de los usuarios de nuestra plataforma, lo que a su vez fomenta la inversión en energías renovables. Desarrollamos un token respaldado por activos de energía solar que permite a los inversores obtener participaciones en proyectos. Esto les proporciona una rentabilidad mientras apoyan la sostenibilidad y contribuyen a cerrar la brecha de financiación”.

Unergy ya orientó inversiones para respaldar 18 proyectos de minigranjas e instalaciones de paneles solares en más de 30 techos industriales. Sus inversores reciben un retorno promedio de 11,6% anual en USDC. “Blockchain está demostrando ser fundamental para integrar a más personas en proyectos de energía sostenible”.

Otra área avanzando en el ecosistema ReFi es el uso de blockchain para microcréditos a agricultores. Allí se ubica EthicHub, que nació en 2017 después de que Jori Armbruster hiciera un máster de innovación y conociera la tecnología. “Visioné la capacidad de construir un nuevo sistema financiero que dejará obsoleto el anterior, que excluyó a un cuarto de la población mundial, los llamados desbancarizados: principalmente pequeños agricultores en países en vías de desarrollo. EthicHub trabaja en la intersección de crypto e impacto, con foco en el pequeño agricultor de café, que es un sector que tanto mi cofundadora Gabriela como yo conocemos”, cuenta. “Cuando llevaba la finca de café de mi familia pensaba que no tenía sentido que los productores, teniendo una actividad productiva rentable, tuvieran que pagar tasas de interés tan altas. En el caso de los pequeños productores de café llegan a más del 100%, ya que solo tienen acceso a préstamos en efectivo de prestamistas locales. EthicHub construye puentes para conectar a inversores con agricultores, es una forma de arbitraje buscando el beneficio mutuo como motor de un crecimiento sostenible”.

Para Armbruster, blockchain aporta más transparencia y eficiencia al mundo de las microfinanzas, pero también la oportunidad de generar nuevos incentivos. A pesar de que ve ventajas en su uso, para él la tecnología sigue en una fase tan inicial que puede parecer un “lastre” frente a vías tradicionales. “Hay pocos usuarios de blockchain, y los que hay no terminan de encajar con nosotros, ya que son de invertir en nuevas blockchains o memecoins. Pero somos pioneros y poca gente en el mundo entiende tan bien como utilizar esta tecnología para resolver problemas en el mundo real”. 

EthicHub lleva financiados más de 500 proyectos que suman más de USD 4,5 Millones en 6 países de Latinoamérica. “Mantenemos una tasa de impago por debajo del 2%, cubiertos por el sistema de compensación operado por el token Ethix, que ha aguantado muy bien la liquidación de esos impagos”.

Para él, en Latinoamérica ReFi todavía es un nicho, pero es optimista: “El sector está monopolizado por los créditos de carbono, ya que es un mercado con cierto volumen donde la propuesta de valor de blockchain es obvia. Todavía hay mucho recorrido por delante”.

En gestión de residuos, una iniciativa interesante que comentamos en el newsletter pasado es UPFC, de Unplastify. Incorpora blockchain para ofrecer una certificación en red validada por terceros (individuos que se capacitan en medición de huella plástica y tecnología blockchain); y al otorgar la validación, las empresas o usuarios que redujeron el uso de plástico reciben tokens por toneladas de plástico evitadas, que en el futuro pueden ser vendibles. “En el ámbito de los residuos, la mayoría de proyectos tokenizan la basura para que las empresas obtengan créditos por cantidad de basura que entregan a cooperativas, y que las personas que procesan los residuos obtengan créditos que después les brindan beneficios. Nosotros nos enfocamos en atacar el problema de raíz, fomentando disminuir el uso de plástico descartable”, cuenta Mara Gabriel, co-founder y COO de UPFC.

“Hoy la desplastificación tiene un costo operativo, de procesos, material para las empresas. La idea es visibilizar a las que están reduciendo el uso de plástico a través de estos créditos, pero también generar un incentivo económico para que la desplastificación deje de ser un costo extra y sea monetizable. Si bien hoy está más en boga medir la huella de carbono o la huella hídrica, creemos que la plástica va a ganar atención en los próximos años a medida que avance el tratado global de plásticos que se viene debatiendo en el marco de la ONU”.

Para Gabriel, el entusiasmo por blockchain hizo que proyectos adoptaran la tecnología sin tanto sentido, pero esto está madurando y los que persisten son los que hicieron un buen uso. “El ecosistema es grande y muy rico, pero falta inyección de capitales para que los proyectos puedan crecer y escalar”.

Hacia la consolidación del impacto

Si algo queda claro de este sondeo, es que hay un gran entusiasmo por la tecnología y un enorme potencial para que sirva para acelerar la regeneración ambiental. Coincidimos con los entrevistados en que parece parece ser una gran oportunidad para Latinoamérica: el potencial de los servicios ecosistémicos de la región, las necesidades de financiamiento, los marcos regulatorios exigiendo trazabilidad, sumado a hubs de desarrollo y expertise crypto reconocidos a nivel global parecen haber generado excelentes condiciones para el florecimiento de startups ReFi.

Ahora nos queda el desafío de hacer que estos proyectos escalen, consigan la adopción de usuarios y empresas y que su impacto no quede en cifras en blockchain sino que su crecimiento se traduzca en impacto positivo en el mundo real. ¿Qué opinan ustedes?

AGENDA

Nesst (Colombia y Perú). Hasta el 15 de abril se puede aplicar a este fondo que brinda préstamos y asistencia técnica a empresas y/o organizaciones que ofrecen oportunidades de empleo sostenible a personas vulnerables. Los préstamos van de USD 200.000 a 500.000 para órdenes de compra, capital de trabajo estructural y financiamiento a largo plazo. Más información: https://es.nesst.org/convocatoria-2024

Foodtech World Cup (Global). Hasta el 19 de abril se puede ingresar a este certamen orientado a emprendimientos que trabajen en circularidad alimentaria, IA y herramientas digitales, proteínas sostenibles, nutrición personalizada, seguridad alimentaria y trazabilidad, nuevos conceptos de productos alimenticios, y nuevos ingredientes y tecnologías. Las 60 startups del shortlist podrán presentar virtualmente ante una audiencia de jueces regionales, aparecer en el sitio web de HackSummit y beneficiarse de cobertura y apoyo en medios; mientras que las 12 finalistas podrán presentarse en el escenario ante una audiencia de más de 500 inversores y recibir conexiones personalizadas. Más info: https://www.hacksummit.co/foodtech-world-cup

IFSP2024 (Latam). El 30 de abril comienza este programa de levantamiento de capital de Impacta VC que enseña a diseñar una estrategia de fundraising. Consiste en clases online, masterclasses y workshops, y charlas con rockstars del ecosistema emprendedor. Los requisitos son estar buscando una ronda de entre USD 300.000 y 5 millones durante el programa, no tener más del 50% de tu ronda comprometida, tener un runway mínimo de 6 meses, hablar y/o entender inglés. Más info: https://www.impacta.vc/ifsp/home

Ray of Hope Accelerator (Global). Hasta el 4 de mayo se puede aplicar al programa que acelera startups inspiradas en la naturaleza para escalar soluciones sistémicas a los desafíos ambientales más urgentes del mundo. Apoya una cohorte de diez startups por año en etapas Pre-seed hasta Series A. Cada una recibe USD 15.000 en financiamiento no dilutivo y más de USD 50.000 en servicios (coaching personalizado, presentaciones a inversores, un retiro en la naturaleza de 4 días y materiales de formación integral). Más info: https://biomimicry.org/rayofhopeprize/

AgroConnect (Argentina). Este evento busca conectar al ecosistema agroindustrial con el mundo universitario, donde jóvenes de cualquier carrera y universidad puedan participar y adentrarse en el mundo del agro. Incluye charlas, paneles, stands educativos y talleres prácticos, con entrada gratuita. El sábado 4 de mayo de 10:00 a 20:00 en Ciudad de Buenos Aires y también por streaming. Inscripciones: https://forms.gle/u72Yyx8MsBg398de9

Emprelatam (Latinoamérica). Hasta el 5 de mayo se puede aplicar a los programas de esta aceleradora, que ofrece espacios para startups en etapas de Exploración, Aceleración, Grow & Scale, Expansión a Brasil y Expansión a México. Los participantes obtienen capacitaciones y beneficios equity-free por montos que van de USD 35.000 a 190.000. Más info: https://emprelatam.com/

Climate Economy Forum Latin America 2024 (Colombia). Este evento presencial organizado por Latam Green reunirá a líderes del sector, expertos ambientales y entusiastas del cambio climático. Se explorarán soluciones para carbono neutralidad y prácticas empresariales sostenibles. El 7 de mayo en Bogotá, Colombia. Más info: https://live.eventtia.com/es/cef2024

Greentech 2024 (Argentina, Bolivia, Costa Rica, México, Panamá, Perú y Uruguay). Esta iniciativa de Village Capital y la Fundación Moody's busca apoyar innovaciones sostenibles de startups lideradas por diversidades que estén creando soluciones para acelerar el cambio en cleantech, climatech, agtech y seguridad alimentaria, economía circular y regenerativa, gestión de recursos naturales, agua, saneamiento y salud. Las elegidas participarán en workshops y sesiones de coaching. Hasta el 10 de mayo. Más info: https://newsandviews.vilcap.com/press-releases/village-capital-puts-out-call-for-latam-startups-focused-on-greentech

Foro Climatech Córdoba (Argentina). La organización Climatech Argentina junto a Corlab (Laboratorio de Innovación Pública y Govtech de la Municipalidad de Córdoba) organizan un encuentro de la comunidad de emprendimientos e inversiones para la mitigación climática y regeneración ambiental. Tendrá lugar el 15 de mayo con entrada libre y gratuita en la ciudad de Córdoba. Atención a nuestras redes (Instagram, X y Linkedin) para más información.

Convocatoria Danta Fund (Latam). Hasta el 15 de mayo está abierta la convocatoria de Danta Fund, fondo climatech de Costa Rica, para startups BtoB en los verticales agtech, biotech, aero-espacial y foodtech, en etapa pre-semilla (prototipo en laboratorio por lo menos), con equipo de al menos dos founders y soluciones para ser incorporadas por grandes empresas, corporaciones o gobierno. Ofrecen tickets de USD 50.000 a 100.000. Aplicaciones: https://forms.gle/6CN6Tk8YVdF7x3h86

Source: https://pulsobyantom.substack.com/p/refi-2024